Oil Holds Steady As Investors Watch for Trade War Developments

Oil retreated as optimism spurred by Saudi Arabia’s surprise output cut was overshadowed by demand concerns.

Sheela Tobben

10 Dec 2019, 09:40 AM IST

Oil Holds Steady As Investors Watch for Trade War Developments

Petroleum fuel falls from a hand pump at a gas station operated by Bashneft PAO in Ufa, Russia. (Photographer: Andrey Rudakov/Bloomberg)

(Bloomberg) -- Oil settled near the highest close since September as investors shifted their focus to the ongoing U.S.-China trade talks ahead of the looming tariff deadline.

Futures in New York fell 0.3% on Monday after rising 7.3% last week. Saudi Arabia voluntarily pledged to pump 400,000 barrels a day less than mandated by OPEC and its allies, translating to total overall curbs for the group of 2.1 million barrels a day. However, gloomy demand data capped that bullish impact, with an unexpected decline in Chinese exports last month as a consequence of the U.S.-China trade war.

The market will now be watching for developments in U.S.-China trade talks in the run-up to Sunday, when new and higher tariffs begin, said John Kilduff, a founding partner at hedge fund Again Capital LLC in New York.

“If the tariffs go ahead this Sunday, it would harm global demand outlook,” he said. “But if a deal is struck this week, we could see prices punch through the resistance just above the $59 level in WTI.”

Goldman Sachs Group Inc. raised its 2020 Brent forecast after the OPEC+ deal, saying the group is aiming to tackle the market’s short-term imbalances. Still, the prolonged trade war continues to hang over the market as traders await news on whether Washington will go ahead with a planned hike on Chinese imports later this month. Chinese exports to the U.S. fell 23% last month from a year earlier, the most since February. Meanwhile, the U.S. government reported that no U.S. crude was exported to the Asian nation in October for the first time in 9 months.

West Texas Intermediate for January delivery settled 18 cents lower to $59.02 a barrel on the New York Mercantile Exchange. The contract closed at $59.20 on Friday, the highest since Sept. 17.

Brent for February settlement dropped 14 cents to $64.25 a barrel on the London-based ICE Futures Europe Exchange. The global benchmark crude traded at a $5.33 premium to WTI for the same month.

Other oil-market news:
Gasoline futures settled up 0.5% to $1.6548 a gallon. A year after a rare bullish call on oil, Saudi Arabia isn’t counting on much of an uplift from crude prices in 2020. Oil doubters got a surprise from Saudi Arabia on Friday: a pledge of deeper production cuts that sent futures surging for their best week since June. Open interest in Nymex crude oil futures rose to the highest level in more than a year after Saudi Arabia surprised the market by voluntarily cutting supply beyond what the new OPEC+ deal requires. Tullow Oil Plc’s chief executive officer and exploration director quit after the company cut its production outlook and suspended the dividend. The shares tumbled, deepening their loss for the year to more than 60%.

Other oil-market news:

Gasoline futures settled up 0.5% to $1.6548 a gallon.
A year after a rare bullish call on oil, Saudi Arabia isn’t counting on much of an uplift from crude prices in 2020.
Oil doubters got a surprise from Saudi Arabia on Friday: a pledge of deeper production cuts that sent futures surging for their best week since June.
Open interest in Nymex crude oil futures rose to the highest level in more than a year after Saudi Arabia surprised the market by voluntarily cutting supply beyond what the new OPEC+ deal requires.
Tullow Oil Plc’s chief executive officer and exploration director quit after the company cut its production outlook and suspended the dividend. The shares tumbled, deepening their loss for the year to more than 60%.

To contact the reporter on this story: Sheela Tobben in New York at vtobben@bloomberg.net

To contact the editors responsible for this story: David Marino at dmarino4@bloomberg.net, Mike Jeffers, Catherine Traywick